[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[S. 3766 Introduced in Senate (IS)]

<DOC>






115th CONGRESS
  2d Session
                                S. 3766

 To establish American opportunity accounts, to modify estate and gift 
  tax rules, to reform the taxation of capital income, and for other 
                               purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           December 18, 2018

  Mr. Booker introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To establish American opportunity accounts, to modify estate and gift 
  tax rules, to reform the taxation of capital income, and for other 
                               purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``American 
Opportunity Accounts Act''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
                 TITLE I--AMERICAN OPPORTUNITY ACCOUNTS

Sec. 101. Definitions.
Sec. 102. American Opportunity Fund.
Sec. 103. AO accounts.
Sec. 104. Assignment, alienation, and treatment of deceased 
                            individuals.
Sec. 105. Rules governing AO accounts relating to investment, 
                            accounting, and reporting.
Sec. 106. American Opportunity Fund Board.
Sec. 107. Fiduciary responsibilities.
Sec. 108. Accounts disregarded in determining eligibility for Federal 
                            benefits.
Sec. 109. Reports.
Sec. 110. Programs for promoting financial capability.
Sec. 111. Tax treatment.
                      TITLE II--REVENUE PROVISIONS

               Subtitle A--Estate and Gift Tax Provisions

Sec. 201. Modification of estate tax rate and basic exclusion amount.
Sec. 202. Required minimum 10-year term, etc., for grantor retained 
                            annuity trusts.
Sec. 203. Certain transfer tax rules applicable to grantor trusts.
Sec. 204. Simplifying gift tax exclusion for annual gifts.
Sec. 205. Modification of rules for value of certain farm real 
                            property.
            Subtitle B--Reform of Taxation of Capital Income

Sec. 211. Increase in capital gains rate.
Sec. 212. Deemed realization of capital gains at time of gift or death.
Sec. 213. Exclusion of certain amounts of realized capital gain.
Sec. 214. Extension of time for payment of tax.
Sec. 215. Waiver of penalty for underpayment of estimated tax.
Sec. 216. Effective date.

                 TITLE I--AMERICAN OPPORTUNITY ACCOUNTS

SEC. 101. DEFINITIONS.

    For purposes of this title--
            (1) American opportunity fund.--The term ``American 
        Opportunity Fund'' means the fund established under section 
        102.
            (2) AO account.--The term ``AO account'' means an American 
        opportunity account established under section 103.
            (3) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury or the Secretary's delegate.
            (4) American opportunity fund board.--The term ``American 
        Opportunity Fund Board'' means the board established pursuant 
        to section 106.
            (5) Executive director.--The term ``Executive Director'' 
        means the executive director appointed pursuant to section 106.

SEC. 102. AMERICAN OPPORTUNITY FUND.

    (a) Establishment.--There is established in the Treasury of the 
United States a fund to be known as the ``American Opportunity Fund''.
    (b) Amounts Held by Fund.--The American Opportunity Fund consists 
of the sum of all amounts paid into the Fund under this title, 
increased by the total net earnings from investments of sums held in 
the Fund or reduced by the total net losses from investments of sums 
held in the Fund, and reduced by the total amount of payments made from 
the Fund (including payments for administrative expenses).
    (c) Use of Fund.--
            (1) In general.--The sums in the American Opportunity Fund 
        are appropriated and shall remain available without fiscal year 
        limitation--
                    (A) to make contributions to AO accounts;
                    (B) to invest under section 105;
                    (C) to make distributions in accordance with this 
                title;
                    (D) to pay the administrative expenses of carrying 
                out this title; and
                    (E) to purchase insurance as provided in section 
                107(c)(2).
            (2) Exclusive purposes.--The sums in the American 
        Opportunity Fund shall not be appropriated for any purpose 
        other than the purposes specified in this section and may not 
        be used for any other purpose.
    (d) Transfers to American Opportunity Fund.--The Secretary shall 
make transfers from the general fund of the Treasury to the American 
Opportunity Fund as follows:
            (1) Initial contribution for eligible individuals born 
        after december 31, 2018.--Upon receipt of a certification under 
        section 103(b)(2) with respect to an individual born after 
        December 31, 2018, the Secretary shall transfer $1,000 to the 
        AO account of the individual.
            (2) Annual contributions.--
                    (A) In general.--Each year which occurs after the 
                year in which an AO account is established for an 
                eligible individual and before the year the eligible 
                individual attains the age of 18, the Secretary shall 
                transfer the annual contribution amount to the AO 
                account of the individual.
                    (B) Annual contribution amount.--The annual 
                contribution amount shall be the amount such that the 
                annual contribution amount for any taxpayer whose 
                household income is within an income tier specified in 
                the following table shall decrease, on a sliding scale 
                in a linear manner, from the initial amount to the 
                final amount specified in such table for such income 
                tier:


------------------------------------------------------------------------
In the case of household income  (expressed as  The initial
  a percent of the poverty line)  within the     amount is--  The final
            following income tier:                           amount is--
------------------------------------------------------------------------
Up to 100 percent.............................       $2,000       $2,000
100 percent up to 125 percent.................        2,000        1,500
125 percent up to 175 percent.................        1,500        1,000
175 percent up to 225 percent.................        1,000          500
225 percent up to 325 percent.................          500          250
325 percent up to 500 percent.................          250            0
500 percent or more...........................            0            0
------------------------------------------------------------------------

                    (C) Applicable household income; poverty line.--For 
                purposes of this paragraph--
                            (i) Applicable household income.--The term 
                        ``applicable household income'' means household 
                        income (as defined in section 36B(d) of the 
                        Internal Revenue Code of 1986), except that--
                                    (I) with respect to any calendar 
                                year, the Secretary shall use the 
                                income of the most recent taxable year 
                                for which information is available; and
                                    (II) in determining household 
                                income the Secretary shall aggregate 
                                the income of married individuals 
                                filing separate tax returns.
                            (ii) Poverty line.--The term poverty line 
                        ``poverty line'' has the meaning given such 
                        term under section 36B(d) of the Internal 
                        Revenue Code of 1986.
                    (D) Authority to provide tax information.--
                            (i) In general.--Section 6103(l) of the 
                        Internal Revenue Code of 1986 is amended by 
                        adding at the end the following new paragraph:
            ``(23) Disclosure of return information to carry out 
        eligibility requirements for certain programs.--
                    ``(A) In general.--The Secretary shall disclose to 
                officers and employees of the Department of Treasury or 
                the American Opportunity Fund Board return information 
                of any taxpayer whose income is relevant in determining 
                any annual contribution to an American Opportunity 
                Account under section 102 of the American Opportunity 
                Accounts Act. Such return information shall be limited 
                to--
                            ``(i) taxpayer identity information with 
                        respect to such taxpayer,
                            ``(ii) the filing status of such taxpayer,
                            ``(iii) the number of individuals for whom 
                        a deduction is allowed under section 151 with 
                        respect to the taxpayer (including the taxpayer 
                        and the taxpayer's spouse),
                            ``(iv) the modified adjusted gross income 
                        (as defined in section 36B) of such taxpayer, 
                        of any spouse of such taxpayer who filed a 
                        separate return, and of each of the other 
                        individuals included under clause (iii) who are 
                        required to file a return of tax imposed by 
                        chapter 1 for the taxable year,
                            ``(v) such other information as is 
                        prescribed by the Secretary by regulation as 
                        might indicate whether the taxpayer is eligible 
                        for such an annual contribution (and the amount 
                        thereof), and
                            ``(vi) the taxable year with respect to 
                        which the preceding information relates or, if 
                        applicable, the fact that such information is 
                        not available.
                    ``(B) Restriction on use of disclosed 
                information.--Return information disclosed under 
                subparagraph (A) may be used by officers and employees 
                of the Department of Treasury or the American 
                Opportunity Fund Board for the purposes of, and to the 
                extent necessary in establishing eligibility for, and 
                verifying the appropriate amount of, any annual 
                contribution described in subparagraph (A).''.
                            (ii) Procedures and recordkeeping related 
                        to disclosures.--Paragraph (4) of section 
                        6103(p) of such Code is amended by striking 
                        ``or (22)'' each place it appears and inserting 
                        ``(22), or (23)''.
                    (E) Study on incorporation of other wealth 
                factors.--Not later than 2 years after the date of the 
                enactment of this Act, the Comptroller General shall 
                submit to Congress and the Secretary of Treasury a 
                report on the feasibility and distributive impacts of a 
                new measure for determining the amount of the annual 
                contribution amount under this paragraph based on 
                family wealth, total assets, and overall net worth. 
                Such measure may--
                            (i) include financial assets, the value of 
                        family home, retirement accounts, business and 
                        entrepreneurial ventures, potential future 
                        inheritances, and any other assets or debts; 
                        and
                            (ii) continue to factor in current or past 
                        income to the extent such information is useful 
                        in estimating overall household wealth.
            (3) Adjustment for inflation.--
                    (A) In general.--For each calendar year beginning 
                after 2019, each of the dollar amounts under paragraphs 
                (1) and (2)(B)(i) shall be increased by such dollar 
                amount multiplied by the cost-of-living adjustment 
                determined under section 1(f)(3) of the Internal 
                Revenue Code of 1986 determined by substituting 
                ``calendar year 2018'' for ``calendar year 2016'' in 
                subparagraph (A)(ii) thereof.
                    (B) Rounding.--If any amount adjusted under 
                paragraph (1) is not a multiple of $50, such amount 
                shall be rounded to the next lowest multiple of $50.
    (e) Prohibition on Use of Payroll Taxes To Fund AO Accounts.--The 
American Opportunity Fund and AO accounts are wholly separate and 
unique from the Social Security system. No amount from any tax on 
employment may be contributed to the American Opportunity Fund or AO 
accounts.

SEC. 103. AO ACCOUNTS.

    (a) In General.--
            (1) Establishment.--The Executive Director shall establish 
        in the American Opportunity Fund an account (to be known as an 
        ``American Opportunity account'' or an ``AO account'') for each 
        eligible individual certified under subsection (b). Each such 
        account shall be identified to its account holder by means of a 
        unique personal identifier currently recognized by the Internal 
        Revenue Service and shall remain in the American Opportunity 
        Fund.
            (2) Account balance.--The balance in an account holder's AO 
        account at any time is the excess of--
                    (A) the sum of--
                            (i) all deposits made into the American 
                        Opportunity Fund and credited to the account 
                        under paragraph (3); and
                            (ii) the total amount of allocations made 
                        to and reductions made in the account pursuant 
                        to paragraph (4); over
                    (B) the amounts paid out of the account with 
                respect to such individual under subsection (c).
            (3) Crediting of contributions.--Pursuant to regulations 
        which shall be prescribed by the Executive Director, the 
        Executive Director shall credit to each AO account the amounts 
        paid into the American Opportunity Fund under section 102(d) 
        which are attributable to the account holder of such account.
            (4) Allocation of earnings and losses.--The Executive 
        Director shall allocate to each AO account an amount equal to 
        the net earnings and net losses from each investment of sums in 
        the American Opportunity Fund which are attributable, on a pro 
        rata basis, to sums credited to such account, reduced by an 
        appropriate share of the administrative expenses paid out of 
        the net earnings, as determined by the Executive Director.
    (b) Eligible Individual.--For purposes of this title--
            (1) In general.--The term ``eligible individual'' means any 
        individual who--
                    (A) was born after December 31, 2003;
                    (B) has not yet attained the age of 18 years; and
                    (C) has a valid, unique, Federal Government issued 
                identification number recognized by the Internal 
                Revenue Service.
            (2) Certification of account holders.--
                    (A) Automatic certification for certain individuals 
                born after december 31, 2018.--On any date after 
                December 31, 2018, on which an eligible individual is 
                issued a social security account number under section 
                203(c)(2) of the Social Security Act, the Commissioner 
                of Social Security shall certify to the Executive 
                Director and the Secretary of the Treasury the name of, 
                and social security number issued to, such eligible 
                individual.
                    (B) Other individuals.--In the case of an eligible 
                individual who is not certified under subparagraph (A), 
                such individual may request the establishment an AO 
                account under this subparagraph by application to the 
                Executive Director, and the Executive Director shall 
                certify such individual under this subparagraph.
    (c) Restrictions on Distributions.--
            (1) Age-related restrictions.--
                    (A) In general.--Except as otherwise provided in 
                this paragraph, no amount may be distributed from an AO 
                account before the date on which the account holder 
                attains the age of 18.
                    (B) Higher education expenses.--Subparagraph (A) 
                shall not apply to amounts paid for qualified tuition 
                and related expenses (as defined in section 25A(f)(1) 
                of the Internal Revenue Code of 1986) of the account 
                holder if the account holder is an eligible student (as 
                defined in section 25A(b)(3) of such Code) with respect 
                to such expenses.
                    (C) Authority to provide higher age limit for 
                certain distributions.--The Secretary, in consultation 
                with the American Opportunity Fund Advisory Board, may 
                by regulations provide for a higher age limitation with 
                respects to distributions relating to certain 
                categories of qualified expenses if the Secretary 
                determines that such higher age limitation is 
                appropriate.
            (2) Use-related restrictions.--
                    (A) In general.--No amount may be distributed from 
                an AO account unless the account holder establishes, 
                under rules established by the Executive Director in 
                consultation with the American Opportunity Fund 
                Advisory Board, that such amount shall be used for a 
                qualified expense.
                    (B) Qualified expense.--For purposes of this 
                subsection--
                            (i) In general.--The term ``qualified 
                        expense'' means expenses for any of the 
                        following:
                                    (I) Education of the account 
                                holder.
                                    (II) Ownership of a home by the 
                                account holder.
                                    (III) Any expenses paid or incurred 
                                on or after the date on which the 
                                account holder attains age 59 \1/2\.
                                    (IV) Any other investment in 
                                financial assets or personal capital 
                                that provides long-term gains to wages 
                                and wealth, as established under 
                                regulations promulgated by the 
                                Secretary, in consultation with the 
                                Executive Director and the American 
                                Opportunity Fund Advisory Board.
                            (ii) Exception.--Such term shall not 
                        include any expense described in clause (i) 
                        which is paid to a person who does not meet 
                        such standards as are prescribed by the 
                        Secretary, in consultation with the Executive 
                        Director and the American Opportunity Fund 
                        Advisory Board.
            (3) American opportunity account advisory board.--For 
        purposes of this subsection, the term ``American Opportunity 
        Fund Advisory Board'' means an advisory board established by 
        the Secretary consisting of individuals with expertise in 
        savings and asset-building, home financing, education 
        financing, consumer financial protection, and such other areas 
        as the Secretary may determine appropriate.

SEC. 104. ASSIGNMENT, ALIENATION, AND TREATMENT OF DECEASED 
              INDIVIDUALS.

    (a) Assignment and Alienation.--Under regulations which shall be 
prescribed by the Executive Director, rules relating to assignment and 
alienation applicable under chapter 84 of title 5, United States Code, 
with respect to amounts held in accounts in the Thrift Savings Fund 
shall apply with respect to amounts held in AO accounts in the American 
Opportunity Fund.
    (b) Treatment of Accounts of Deceased Individuals.--In the case of 
a deceased account holder of an AO account which has an account balance 
greater than zero, upon receipt of notification of such individual's 
death, the Executive Director shall close the account and shall 
transfer the balance in such account to the AO account of such account 
holder's surviving spouse or, if there is no such account of a 
surviving spouse, to the duly appointed legal representative of the 
estate of the deceased account holder, or if there is no such 
representative, to the person or persons determined to be entitled 
thereto under the laws of the domicile of the deceased account holder.

SEC. 105. RULES GOVERNING AO ACCOUNTS RELATING TO INVESTMENT, 
              ACCOUNTING, AND REPORTING.

    (a) Investment Program.--The Secretary shall establish, and the 
American Opportunity Fund Board shall invest in debt obligations of the 
United States government with a term of 30 years.
    (b) Independent Public Accountant.--
            (1) In general.--Under regulations which shall be 
        prescribed by the Executive Director, and subject to the 
        provisions of this title, section 8439(b) of title 5, United 
        States Code, (relating to engagement of independent qualified 
        public accountant) shall apply with respect to the American 
        Opportunity Fund and accounts maintained in such Fund in the 
        same manner and to the same extent as such section relates to 
        the Thrift Savings Fund and the accounts maintained in the 
        Thrift Savings Fund.
            (2) Application rules.--For purposes of paragraph (1), 
        references in such section 8439(b) to an employee, Member, 
        former employee, or former Member shall be deemed references to 
        an account holder of an AO account in the American Opportunity 
        Fund.
    (c) Confidentiality and Disclosure.--
            (1) In general.--Except as otherwise authorized by Federal 
        law, the American Opportunity Fund Board, the Executive 
        Director, and any employee of the American Opportunity Fund 
        Board shall not disclose information with respect to the 
        American Opportunity Fund or any account maintained in such 
        Fund.
            (2) Disclosure to designee of beneficiary.--The Executive 
        Director may, subject to such requirements and conditions as he 
        may prescribe by regulations, disclose such information with 
        respect to the AO account of the beneficiary to such person or 
        persons as the beneficiary may designate in a request for or 
        consent to such disclosure, or to any other person at the 
        beneficiary's request to the extent necessary to comply with a 
        request for information or assistance made by the beneficiary 
        to such other person.

SEC. 106. AMERICAN OPPORTUNITY FUND BOARD.

    (a) In General.--There is established in the executive branch of 
the Government an American Opportunity Fund Board.
    (b) Composition, Duties, and Responsibilities.--Subject to the 
provisions of this title, the following provisions shall apply with 
respect to the American Opportunity Fund Board in the same manner and 
to the same extent as such provisions relate to the Federal Retirement 
Thrift Investment Board:
            (1) Section 8472 of title 5, United States Code (relating 
        to composition of Federal Retirement Thrift Investment Board).
            (2) Section 8474 of such title (relating to Executive 
        Director).
            (3) Section 8476 of such title (relating to administrative 
        provisions).

SEC. 107. FIDUCIARY RESPONSIBILITIES.

    (a) In General.--Under regulations of the Secretary of Labor, the 
provisions of sections 8477 and 8478 of title 5, United States Code, 
shall apply in connection with the American Opportunity Fund and the 
accounts maintained in such Fund in the same manner and to the same 
extent as such provisions apply in connection with the Thrift Savings 
Fund and the accounts maintained in the Thrift Savings Fund.
    (b) Investigative Authority.--Any authority available to the 
Secretary of Labor under section 504 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1134) is hereby made available to the 
Secretary of Labor, and any officer designated by the Secretary of 
Labor, to determine whether any person has violated, or is about to 
violate, any provision applicable under subsection (a).
    (c) Exculpatory Provisions; Insurance.--
            (1) In general.--Any provision in an agreement or 
        instrument which purports to relieve a fiduciary from 
        responsibility or liability for any responsibility, obligation, 
        or duty under this title shall be void.
            (2) Insurance.--Amounts in the American Opportunity Fund 
        available for administrative expenses shall be available and 
        may be used at the discretion of the Executive Director to 
        purchase insurance to cover potential liability of persons who 
        serve in a fiduciary capacity with respect to the Fund and 
        accounts maintained therein, without regard to whether a policy 
        of insurance permits recourse by the insurer against the 
        fiduciary in the case of a breach of a fiduciary obligation.

SEC. 108. ACCOUNTS DISREGARDED IN DETERMINING ELIGIBILITY FOR FEDERAL 
              BENEFITS.

    Amounts in any AO account shall not be taken into account in 
determining any individual's or household's financial eligibility for, 
or amount of, any benefit or service, paid for in whole or in part with 
Federal funds, including student financial aid.

SEC. 109. REPORTS.

    (a) Reports to Congress.--The Executive Director, in consultation 
with the Secretary, shall annually transmit a written report to the 
Congress. Such report shall include--
            (1) a detailed description of the status and operation of 
        the American Opportunity Fund and the management of the AO 
        accounts; and
            (2) a detailed accounting of the administrative expenses in 
        carrying out this title, including the ratio of such 
        administrative expenses to the balance of the American 
        Opportunity Fund and the methodology adopted by the Executive 
        Director for allocating such expenses among the AO accounts.
    (b) Reports to Account Holders.--The American Opportunity Fund 
Board shall prescribe regulations under which each individual for whom 
an AO account is maintained shall be furnished with an annual statement 
relating to the individual's account, which shall include--
            (1) a statement of the balance of individual's AO account;
            (2) a projection of the account's growth by the time the 
        individual attains the age of 18; and
            (3) such other information as the Secretary deems relevant.

SEC. 110. PROGRAMS FOR PROMOTING FINANCIAL CAPABILITY.

    The Secretary of the Treasury, in coordination with the Financial 
Literacy and Education Commission, shall develop programs to promote 
the financial capability of account holders of AO accounts.

SEC. 111. TAX TREATMENT.

    (a) Contributions and Distributions.--Part III of subchapter B of 
chapter 1 of the Internal Revenue Code of 1986 is amended by inserting 
after section 139G the following new section:

``SEC. 139H. CONTRIBUTIONS TO AND DISTRIBUTIONS FROM AO ACCOUNTS.

    ``Gross income shall not include--
            ``(1) any contribution credited to the AO account of the 
        taxpayer under section 103(a)(3) of the American Opportunity 
        Accounts Act, and
            ``(2) any distribution from such an AO account.''.
    (b) Tax Treatment of Earnings and Distributions.--Subchapter F of 
chapter 1 of the Internal Revenue Code of 1986 is amended by adding at 
the end the following new part:

          ``PART IX--AMERICAN OPPORTUNITY FUND AND AO ACCOUNTS

``Sec. 530A. American Opportunity Fund and AO accounts.

``SEC. 530A. AMERICAN OPPORTUNITY FUND AND AO ACCOUNTS.

    ``(a) General Rule.--The American Opportunity Fund and AO accounts 
shall be exempt from taxation under this subtitle. Notwithstanding the 
preceding sentence, a AO account shall be subject to the taxes imposed 
by section 511 (relating to imposition of tax on unrelated business 
income of charitable organizations).
    ``(b) Definitions.--For purposes of this section, the terms 
`American Opportunity Fund' and `AO account' have the meanings given 
such terms under title I of the American Opportunity Accounts Act.''.
    (c) Conforming Amendments.--
            (1) The table of sections for part III of subchapter B of 
        chapter 1 of the Internal Revenue Code of 1986 is amended by 
        inserting after the item related to section 139G the following 
        new item:

``Sec. 139H. Contributions to and distributions from AO accounts.''.
            (2) The table of parts for subchapter F of chapter 1 of 
        such Code is amended by adding at the end the following new 
        item:

        ``Part IX--American Opportunity Fund and AO Accounts''.

    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2018.

                      TITLE II--REVENUE PROVISIONS

               Subtitle A--Estate and Gift Tax Provisions

SEC. 201. MODIFICATION OF ESTATE TAX RATE AND BASIC EXCLUSION AMOUNT.

    (a) Permanent Extension of Maximum Estate Tax Rate and Basic 
Exclusion Amount as in Effect in 2009.--
            (1) Maximum estate tax rate.--The last row of the table 
        contained in subsection (c) of section 2001 of the Internal 
        Revenue Code of 1986 is amended by striking ``40 percent'' and 
        inserting ``45 percent''.
            (2) Basic exclusion amount.--Paragraph (3) of section 
        2010(c) of the Internal Revenue Code of 1986 is amended to read 
        as follows:
            ``(3) Basic exclusion amount.--For purposes of this 
        subsection, the basic exclusion amount is $3,500,000.''.
    (b) Additional Taxes for Estates Over $10,000,000.--The table 
contained in section 2001(c), as amended by subsection (a), is 
amended--
            (1) by inserting ``but not over $10,000,000'' after ``Over 
        $1,000,000'' in the last row; and
            (2) by adding at the end the following:

    ``Over $10,000,000 but not over 
        $50,000,000.
                                        $4,395,800, plus 55 percent of 
                                                the excess of such 
                                                amount over 
                                                $10,000,000.
    Over $50,000,000...............
                                        $26,395,800, plus 65 percent of 
                                                the excess of such 
                                                amount over 
                                                $50,000,000.''.

    (c) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying and gifts made after December 31, 
2018.

SEC. 202. REQUIRED MINIMUM 10-YEAR TERM, ETC., FOR GRANTOR RETAINED 
              ANNUITY TRUSTS.

    (a) In General.--Subsection (b) of section 2702 is amended--
            (1) by redesignating paragraphs (1), (2), and (3) as 
        subparagraphs (A), (B), and (C), respectively, and by moving 
        such subparagraphs (as so redesignated) 2 ems to the right;
            (2) by striking ``For purposes of'' and inserting the 
        following:
            ``(1) In general.--For purposes of'';
            (3) by striking ``paragraph (1) or (2)'' in paragraph 
        (1)(C) (as so redesignated) and inserting ``subparagraph (A) or 
        (B)''; and
            (4) by adding at the end the following new paragraph:
            ``(2) Additional requirements with respect to grantor 
        retained annuities.--For purposes of subsection (a), in the 
        case of an interest described in paragraph (1)(A) (determined 
        without regard to this paragraph) which is retained by the 
        transferor, such interest shall be treated as described in such 
        paragraph only if--
                    ``(A) the right to receive the fixed amounts 
                referred to in such paragraph is for a term of not less 
                than 10 years and not more than the life expectancy of 
                the annuitant plus 10 years,
                    ``(B) such fixed amounts, when determined on an 
                annual basis, do not decrease during the term described 
                in subparagraph (A), and
                    ``(C) the remainder interest has a value, as 
                determined as of the time of the transfer, which is--
                            ``(i) not less than an amount equal to the 
                        greater of--
                                    ``(I) 25 percent of the fair market 
                                value of the property in the trust, or
                                    ``(II) $500,000, and
                            ``(ii) not greater than the fair market 
                        value of the property in the trust.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to transfers made after the date of the enactment of this Act.

SEC. 203. CERTAIN TRANSFER TAX RULES APPLICABLE TO GRANTOR TRUSTS.

    (a) In General.--Subtitle B is amended by adding at the end the 
following new chapter:

             ``CHAPTER 16--SPECIAL RULES FOR GRANTOR TRUSTS

``Sec. 2901. Application of transfer taxes.

``SEC. 2901. APPLICATION OF TRANSFER TAXES.

    ``(a) In General.--In the case of any portion of a trust to which 
this section applies--
            ``(1) the value of the gross estate of the deceased deemed 
        owner of such portion shall include all assets attributable to 
        that portion at the time of the death of such owner,
            ``(2) any distribution from such portion to one or more 
        beneficiaries during the life of the deemed owner of such 
        portion shall be treated as a transfer by gift for purposes of 
        chapter 12, and
            ``(3) if at any time during the life of the deemed owner of 
        such portion, such owner ceases to be treated as the owner of 
        such portion under subpart E of part 1 of subchapter J of 
        chapter 1, all assets attributable to such portion at such time 
        shall be treated for purposes of chapter 12 as a transfer by 
        gift made by the deemed owner.
    ``(b) Portion of Trust to Which Section Applies.--This section 
shall apply to--
            ``(1) the portion of a trust with respect to which the 
        grantor is the deemed owner, and
            ``(2) the portion of the trust to which a person who is not 
        the grantor is a deemed owner by reason of the rules of subpart 
        E of part 1 of subchapter J of chapter 1, and such deemed owner 
        engages in a sale, exchange, or comparable transaction with the 
        trust that is disregarded for purposes of subtitle A.
For purposes of paragraph (2), the portion of the trust described with 
respect to a transaction is the portion of the trust attributable to 
the property received by the trust in such transaction, including all 
retained income therefrom, appreciation thereon, and reinvestments 
thereof, net of the amount of consideration received by the deemed 
owner in such transaction.
    ``(c) Exceptions.--This section shall not apply to--
            ``(1) any trust that is includible in the gross estate of 
        the deemed owner (without regard to subsection (a)(1)), and
            ``(2) any other type of trust that the Secretary determines 
        by regulations or other guidance does not have as a significant 
        purpose the avoidance of transfer taxes.
    ``(d) Deemed Owner Defined.--For purposes of this section, the term 
`deemed owner' means any person who is treated as the owner of a 
portion of a trust under subpart E of part 1 of subchapter J of chapter 
1.
    ``(e) Reduction for Taxable Gifts to Trust Made by Owner.--The 
amount to which subsection (a) applies shall be reduced by the value of 
any transfer by gift by the deemed owner to the trust previously taken 
into account by the deemed owner under chapter 12.
    ``(f) Liability for Payment of Tax.--Any tax imposed pursuant to 
subsection (a) shall be a liability of the trust.''.
    (b) Clerical Amendment.--The table of chapters for subtitle B is 
amended by adding at the end the following new item:

           ``Chapter 16. Special Rules for Grantor Trusts''.

    (c) Effective Date.--The amendments made by this section shall 
apply--
            (1) to trusts created on or after the date of the enactment 
        of this Act;
            (2) to any portion of a trust established before the date 
        of the enactment of this Act which is attributable to a 
        contribution made on or after such date; and
            (3) to any portion of a trust established before the date 
        of the enactment of this Act to which section 2901(a) of the 
        Internal Revenue Code of 1986 (as added by subsection (a)) 
        applies by reason of a transaction described in section 
        2901(b)(2) of such Code on or after such date.

SEC. 204. SIMPLIFYING GIFT TAX EXCLUSION FOR ANNUAL GIFTS.

    (a) In General.--Section 2503 of the Internal Revenue Code of 1986 
is amended--
            (1) by striking paragraph (1) of subsection (b) and 
        inserting the following:
            ``(1) In general.--
                    ``(A) Limit per donee.--In the case of gifts made 
                to any person by the donor during the calendar year, 
                the first $10,000 of such gifts to such person shall 
                not, for purposes of subsection (a), be included in the 
                total amount of gifts made during such year.
                    ``(B) Cumulative limit per donor.--
                            ``(i) In general.--The aggregate amount 
                        excluded under subparagraph (A) with respect to 
                        all transfers described in clause (ii) made by 
                        the donor during the calendar year shall not 
                        exceed $50,000.
                            ``(ii) Transfers subject to limitation.--
                        The transfers described in this clause are--
                                    ``(I) a transfer in trust (with the 
                                exception of any transfer to a trust 
                                described in section 2642(c)(2)),
                                    ``(II) a transfer of an interest in 
                                a passthrough entity,
                                    ``(III) a transfer of an interest 
                                subject to a prohibition on sale, and
                                    ``(IV) any other transfer of 
                                property that, without regard to 
                                withdrawal, put, or other such rights 
                                in the donee, cannot immediately be 
                                liquidated by the donee.'', and
            (2) by striking subsection (c).
    (b) Conforming Amendments.--
            (1) Subparagraph (B) of section 529(c)(2) of the Internal 
        Revenue Code of 1986 is amended by striking ``section 2503(b)'' 
        and inserting ``section 2503(b)(1)(A).
            (2) Clause (i) of section 529A(b)(2)(B) of such Code is 
        amended by striking ``section 2503(b)'' and inserting ``section 
        2503(b)(1)(A)''.
            (3) Paragraph (2) of section 2523(i) of such Code is 
        amended by striking ``section 2503(b)'' and inserting ``section 
        2503(b)(1)(A)''.
            (4) Subsection (c) of such Code of section 2801 is amended 
        by striking ``2503(b)'' and inserting ``2503(b)(1)(A)''.
    (c) Regulations.--The Secretary of the Treasury, or the Secretary 
of the Treasury's delegate, may prescribe such regulations or other 
guidance as may be necessary or appropriate to carry out the amendments 
made by this section.
    (d) Effective Date.--The amendments made by this section shall 
apply to any calendar year beginning after the date of the enactment of 
this Act.

SEC. 205. MODIFICATION OF RULES FOR VALUE OF CERTAIN FARM REAL 
              PROPERTY.

    (a) Increase in Limitation.--
            (1) In general.--Paragraph (2) of section 2032A(a) of the 
        Internal Revenue Code of 1986 is amended by striking 
        ``$750,000'' and inserting ``$3,000,000''.
            (2) Inflation adjustment.--Paragraph (3) of section 
        2032A(a) of such Code is amended--
                    (A) by striking ``1998'' and inserting ``2019'';
                    (B) by striking ``$750,000'' and inserting 
                ``$3,000,000'' in subparagraph (A); and
                    (C) by striking ``calendar year 1997'' and 
                inserting ``calendar year 2018'' in subparagraph (B).
    (b) Qualified Use Limited to Farming Purposes.--
            (1) In general.--Section 2032A(b)(2) is amended by striking 
        ``the devotion of the property'' and all that follows and 
        inserting ``the devotion of the property to use as a farm for 
        farming purposes.''.
            (2) Conforming amendments.--
                    (A) Subsections (c)(6)(A), (h)(3), and (i)(3) of 
                section 2032A of the such Code are each amended by 
                striking ``subparagraph (A) or (B) of''.
                    (B) The heading of section 2032A of such Code (and 
                the item relating to section 2032A in the table of 
                sections for part III of subchapter A of chapter 11 of 
                such Code) is amended by striking ``, etc.,''.
    (c) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying, and gifts made, after December 31, 
2018.

            Subtitle B--Reform of Taxation of Capital Income

SEC. 211. INCREASE IN CAPITAL GAINS RATE.

    (a) In General.--Section 1(h)(1)(D) of the Internal Revenue Code of 
1986 is amended by striking ``20 percent'' and inserting ``24.2 
percent''.
    (b) Minimum Tax.--Section 55(b)(3)(D) of the Internal Revenue Code 
of 1986 is amended by striking ``20 percent'' and inserting ``24.2 
percent''.
    (c) Conforming Amendments.--The following provisions are each 
amended by striking ``20 percent'' and inserting ``20.4 percent'':
            (1) Section 531 of the Internal Revenue Code of 1986.
            (2) Section 541 of the Internal Revenue Code of 1986.
            (3) Section 1445(e)(1) of the Internal Revenue Code of 
        1986.
            (4) Section 1445(e)(6) of the Internal Revenue Code of 
        1986.
            (5) The second sentence of section 7518(g)(6)(A) of the 
        Internal Revenue Code of 1986.
            (6) Section 53511(f)(2) of title 46, United States Code.
    (d) Effective Dates.--
            (1) In general.--Except as otherwise provided, the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 2018.
            (2) Withholding.--The amendments made by paragraphs (3) and 
        (4) of subsection (c) shall apply to amounts paid on or after 
        January 1, 2019.

SEC. 212. DEEMED REALIZATION OF CAPITAL GAINS AT TIME OF GIFT OR DEATH.

    (a) Treatment as Sale.--
            (1) In general.--Part IV of subchapter P of chapter 1 of 
        the Internal Revenue Code of 1986 is amended by adding at the 
        end the following new section:

``SEC. 1261. GAINS FROM CERTAIN PROPERTY TRANSFERRED BY GIFT OR AT 
              DEATH.

    ``(a) In General.--Any capital asset which is transferred by gift 
or upon death shall be treated as sold for its fair market value on the 
date of such gift, death, or transfer.
    ``(b) Exceptions.--
            ``(1) Tangible property.--This section shall not apply to 
        any tangible personal property other than a collectible (as 
        defined in section 408(m) without regard to paragraph (3) 
        thereof).
            ``(2) Spousal exception.--This section shall not apply to 
        any transfer if such transfer is made to the spouse or 
        surviving spouse of the transferor.
            ``(3) Gifts to charity.--This section shall not apply to 
        any transfer if such transfer is made to an organization 
        described in section 170(c).''.
            (2) Clerical amendment.--The table of sections for part IV 
        of subchapter P of chapter 1 of such Code is amended by adding 
        at the end the following new item:

``Sec. 1261. Gains from certain property transferred by gift or upon 
                            death.''.
    (b) Treatment of Basis for Gifts and Bequests to Which Tax 
Applies.--
            (1) Elimination of carryover basis for gifts.--Subsection 
        (a) section 1015 of the Internal Revenue Code of 1986 is 
        amended--
                    (A) by striking ``If the property'' and inserting 
                the following:
            ``(1) Gifts before january 1, 2019.--If the property'';
                    (B) by inserting ``and before January 1, 2019'' 
                after ``after December 31, 1920''; and
                    (C) by adding at the end the following new 
                paragraph:
            ``(2)  Gifts after december 31, 2018.--
                    ``(A) In general.--If the property was acquired by 
                gift after December 31, 2016, the basis shall be the 
                fair market value of such property at the time of the 
                gift.
                    ``(B) Special rules for charitable organizations.--
                In the case of any property acquired by an organization 
                described in section 170(c) by gift, subparagraph (A) 
                shall not apply and paragraph (1) shall be applied 
                without regard to the phrase `and before January 1, 
                2019'.''.
            (2) Property acquired from decedent spouses.--Section 1014 
        of such Code is amended by adding at the end the following new 
        subsection:
    ``(g) Property Acquired From Decedent Spouses.--In the case of any 
property acquired from or which has passed from a decedent in a 
transfer described in section 1041(a)(1), the basis of such property in 
the hands of the transferee shall be determined under section 1041(b) 
and not this section.''.
            (3) Rule for transfers between spouses.--
                    (A) In general.--Section 1041(b) of the Internal 
                Revenue Code of 1986 is amended to read as follows:
    ``(b) Transferee Has Transferor's Basis.--In the case of any 
transfer of property described in subsection (a), the basis of the 
transferee in the property shall be the adjusted basis of the 
transferor.''.
                    (B) Conforming amendment.--Section 1015(e) of such 
                Code is amended by striking ``1041(b)(2)'' and 
                inserting ``1041(b)''.

SEC. 213. EXCLUSION OF CERTAIN AMOUNTS OF REALIZED CAPITAL GAIN.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986, as amended by section 111, is amended by 
inserting after section 139H the following new section:

``SEC. 139I. EXCLUSION GAIN FROM TRANSFERS OF APPRECIATED ASSETS AT 
              DEATH.

    ``(a) In General.--Gross income shall not include so much of the 
aggregate gain from transfers at death described in 1261(a) of any 
capital asset as does not exceed $100,000.
    ``(b) Special Rules for Real Property Used for Farming.--
            ``(1) In general.--
                    ``(A) Application of section.--In the case of 
                qualified real property--
                            ``(i) subsection (a) shall be applied 
                        separately to such qualified real property and 
                        other property, and
                            ``(ii) in applying subsection (a) to such 
                        qualified real property, `the applicable 
                        amount' shall be substituted for `$100,000'.
                    ``(B) Applicable amount.--For purposes of 
                subparagraph (A), the applicable amount is an amount 
                equal to the sum of--
                            ``(i) $1,000,000, plus
                            ``(ii) the excess (not less than zero) of 
                        the amount in effect under subsection (a) over 
                        the aggregate amount of gain from transfers at 
                        death described in section 1261(a) of capital 
                        assets other than qualified real property.
            ``(2) Imposition of additional tax.--
                    ``(A) In general.--The Secretary shall, by 
                regulations, provide for recapturing the benefit under 
                any exclusion allowable under paragraph (1) with 
                respect to any qualified real property if, within 10 
                years after the decedent's death and before the death 
                of the qualified heir--
                            ``(i) the qualified heir disposes of any 
                        interest in qualified real property (other than 
                        by a disposition to a member of his family), or
                            ``(ii) the qualified heir ceases to use for 
                        the qualified use the qualified real property 
                        which was acquired (or passed) from the 
                        decedent.
                    ``(B) Liability.--The benefit recaptured under 
                subparagraph (A) shall be recaptured from the qualified 
                heir.
            ``(3) Definitions.--Any term used in this subsection which 
        is also used in section 2032A shall have the meaning given such 
        term under section 2032A.
    ``(c) Inflation Adjustment.--
            ``(1) In general.--In the case of any taxable year 
        beginning after 2019, the $100,000 amount in subsection (a) and 
        the $1,000,000 in subsection (b)(1)(B)(i) shall each be 
        increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined by substituting in 
                subparagraph (A)(ii) thereof `calendar year 2018' for 
                `calendar year 2016'.
            ``(2) Rounding.--
                    ``(A) In general.--If the dollar amount in 
                subsection (a), after being increased under paragraph 
                (1), is not a multiple of $10,000, such dollar amount 
                shall be rounded to the next lowest multiple of 
                $10,000.
                    ``(B) Qualified real property.--If the dollar 
                amount in subsection (b)(1)(B)(i), after being 
                increased under paragraph (1), is not a multiple of 
                $100,000, such amount shall be rounded to the next 
                lowest multiple of $100,000.''.
    (b) Clerical Amendment.--The table of sections for part III of 
subchapter B of chapter 1 of such Code is amended by inserting after 
section 139H the following new item:

``Sec. 139I. Exclusion gain from transfers of appreciated assets by 
                            gift or at death.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2018.

SEC. 214. EXTENSION OF TIME FOR PAYMENT OF TAX.

    (a) Extension of Time.--
            (1) In general.--Subpart B of chapter 62 of the Internal 
        Revenue Code of 1986 is amended by adding at the end the 
        following new section:

``SEC. 6168. EXTENSION OF TIME FOR PAYMENT OF CAPITAL GAINS ON CERTAIN 
              ASSETS REALIZED BY REASON OF DEATH.

    ``(a) 15-Year Installment Payment.--
            ``(1) In general.--In the case of any gain with respect to 
        an eligible capital asset that is recognized under section 1261 
        by reason of the death of the taxpayer, the taxpayer may elect 
        to pay part or all of tax imposed on such gain in 2 or more 
        (but not exceeding 15) equal installments.
            ``(2) Date for payment of installments.--If an election is 
        made under paragraph (1), the first installment shall be paid 
        not later than the date on which the tax for the taxable year 
        in which the gain described in paragraph (1) occurs is due, and 
        each succeeding installment shall be paid on or before the date 
        which is 1 year after the date prescribed by this paragraph for 
        payment of the preceding installment.
    ``(b) Eligible Capital Asset.--For purposes of this section, the 
term `eligible capital asset' means any capital asset other than 
personal property of a type which is actively traded (within the 
meaning of section 1092(d)(1)).
    ``(c) Portion of Tax Eligible.--The amount of tax to which this 
section applies shall not exceed the excess of--
            ``(1) the tax computed under chapter 1 (determined after 
        application of section 1261), over
            ``(2) the tax computed under chapter 1 (determined without 
        regard to section 1261).
    ``(d) Election.--Any election under subsection (a) shall be made 
not later than the time prescribed by section 6072 for filing the 
return of tax imposed under chapter 1 (including extensions thereof), 
and shall be made in such manner as the Secretary shall by regulations 
prescribe. If an election under subsection (a) is made, the provisions 
of this subtitle shall apply as though the Secretary were extending the 
time for payment of the tax.
    ``(e) Proration of Deficiency to Installments.--If an election is 
made under subsection (a) to pay any part of the tax imposed under 
chapter 1 in installments and a deficiency has been assessed, the 
deficiency shall (subject to the limitation provided by subsection 
(a)(2)) be prorated to the installments payable under subsection (a). 
The part of the deficiency so prorated to any installment the date for 
payment of which has not arrived shall be collected at the same time 
as, and as a part of, such installment. The part of the deficiency so 
prorated to any installment the date for payment of which has arrived 
shall be paid upon notice and demand from the Secretary. This 
subsection shall not apply if the deficiency is due to negligence, to 
intentional disregard of rules and regulations, or to fraud with intent 
to evade tax.
    ``(f) Time for Payment of Interest.--If the time for payment of any 
amount of tax has been extended under this section, interest payable 
under section 6601 on any unpaid portion shall be paid annually at the 
same time as, and as part of, each installment payment of the tax.
    ``(g) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to the application of this section.
    ``(h) Cross References.--
            ``(1) Security.--For authority of the Secretary to require 
        security in the case of an extension under this section, see 
        section 6165.
            ``(2) Interest.--For provisions relating to interest on tax 
        payable in installments under this section, see subsection (k) 
        of section 6601.''.
            (2) Clerical amendment.--The table of sections for subpart 
        B of chapter 62 is amended by adding at the end the following 
        new item:

``Sec. 6168. Extension of time for payment of capital gains on certain 
                            assets realized by reason of death.''.
    (b) Interest.--Section 6601 of the Internal Revenue Code of 1986 is 
amended by redesignating subsection (k) as subsection (l) and by 
inserting after subsection (j) the following new subsection:
    ``(k) Special Rate for Tax Extended Under Section 6168.--If the 
time for payment of an amount of tax imposed by chapter 11 is extended 
as provided in section 6168, in lieu of the annual rate provided by 
subsection (a), interest shall be paid at a rate equal to 45 percent of 
the annual rate provided by subsection (a). For purposes of this 
subsection, the amount of any deficiency which is prorated to 
installments payable under section 6168 shall be treated as an amount 
of tax payable in installments under such section.''.

SEC. 215. WAIVER OF PENALTY FOR UNDERPAYMENT OF ESTIMATED TAX.

    Section 6654(e)(3) of the Internal Revenue Code of 1986 is amended 
by adding at the end the following new subparagraph:
                    ``(C) Capital gains payable upon death.--No 
                addition to tax shall be imposed under subsection (a) 
                with respect to any underpayment if the taxpayer died 
                during the taxable year and the Secretary determines 
                that the amount of the underpayment is due to capital 
                gains that were realized by reason of section 1261.''.

SEC. 216. EFFECTIVE DATE.

    Except as otherwise provided, the amendments made by this subtitle 
shall apply to transfers after December 31, 2018, in taxable years 
beginning after such date.
                                 <all>